The consensus is for the RBA to hike by 25bp tomorrow

Whilst the potential for a pause cannot be ignored, I suspect the RBA are more likely to hike rates by 25bp tomorrow as they do not meet again until February.


What has happened since the last RBA meeting?

  • 10th November: Australia's central bank says nearer to point when it can wait on rates (Reuters)
  • CPI fell to 6.9% y/y, down from 7.4% and beneath the 7.5% - suggesting inflation has peaked
  • Governor Lowe reiterated his belief that the economy can have a soft landing
  • PMI’s continued south, business sentiment has been flat
  • Consumer inflation expectations hit a record high according to one survey
  • OIS curve is pointing lower as the case for a higher terminal rate diminishes




The RBA’s cash rate currently sits at 2.85%, after hiking rates for a record seven consecutive meetings totalling 275bp. And despite being a late starter compared to the RBNZ, Fed and pretty much everyone – the RBA continue to believe the terminal rate will remain lower than their peers. For comparison, RBNZ have an OCR of 4.25% and expected to rise to at least 4.5%, yet a recent poll suggests the RBA’s terminal rate will be around 3.6% next year.


I expect the RBA to hike rates for a record eight consecutive meeting tomorrow by 25bp. With that said, we shouldn’t discount the potential for a hold – which I’m sure consumers would love. Yet they’re more likely to hike to 3.1% as they do not meet again until February, so technically January is kind of a pause. But the case for a pause is certainly building. Some measures of inflation expectations are moving lower, and the monthly inflation print suggests inflation has peaked at 7.4% y/y – as it fell to 6.9%, compared with 7.5% expected. All 30 economists polled by Reuters expect the RBA to hike by 25bp tomorrow, however money markets currently estimate just a 56% probability – which means there’s a 44% chance that they will pause.



AUD/USD 4-hour chart:

The symmetrical triangle breakout on AUD/USD remains in play on the 4-hour chart, and prices pulled back into a support cluster following Friday’s NFP report. Next target for bulls to consider remains 69c, so we’re hoping prices can now remain above Friday’s low and revert higher.




How to trade with

Follow these easy steps to start trading with today:

  1. Open a account, or log in if you’re already a customer.
  2. Search for the pair you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.


How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the market you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account